India’s petrochemical consumption growth is projected to stay robust at 6-7% annually in the medium term, driven by economic expansion and downstream product demand. A report released on Monday highlighted the importance of reducing reliance on imports as a strategic goal. Public and private-sector companies are actively working on plans to boost their petrochemical capacity to achieve this aim.
Polypropylene capacity is set to increase by 1.8 times between FY25-FY30, surpassing the expected demand growth of 1.4 times. This growth trajectory could significantly reduce import dependence by FY30, according to the report. Rabin Bihani, Associate Director at CareEdge Ratings, emphasized the need for domestic petrochemical players to enhance cost competitiveness to ensure reasonable returns on their investments.
In the near term, prices and spreads in the domestic petrochemical sector are anticipated to remain weak due to global oversupply. While there has been a slight recovery in spreads in H1FY26, it could lead to around a 200 bps improvement in EBITDA margin in FY26. However, sustained recovery and achieving optimal operating profitability will depend on factors like cost competitiveness, global demand-supply dynamics, and support from the Government.
The report underlines that major petrochemical consumption in India, including polymers like Polypropylene (PP), High Density Polyethylene (HDPE), Low Density Polyethylene (LDPE), Linear Low Density Polyethylene (LLDPE), Polyvinyl Chloride (PVC), aromatics, and elastomers, has shown healthy growth in recent years. Despite this growth, limited domestic capacity additions have led to a high reliance on imports to meet the rising domestic demand.
Globally, significant capacity additions in the petrochemical sector, mainly driven by China, have outpaced global demand growth in recent years. This imbalance has resulted in weak product spreads and pressure on the operating profitability of Indian manufacturers. Competition from cheaper Chinese imports has further impacted the profitability of Indian manufacturers over the past three years, ending FY25.
